COMPETITION ACT, 2002

COMPETITION ACT, 2002

AMITY LAW SCHOOL

Submitted by Submitted to

Anjali Kumari Dr. Brajesh Kumar Singh

Enrolment No. A50801815007 (Associate prof.), ALS

LL.M. (2015-2016)

AMITY LAW SCHOOL

Amity University, Haryana

2015-2016

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COMPETITION LAW IN INDIA – AN OVERVIEW 

Competition is a process of economic rivalry between market players to attract

customers. Competition also refers to a situation in a business environment where

businesses independently strive for the patronage of customers in order to achieve their

business objective. Free and fair competition is one of the pillars of an efficient business

environment.

In the recent years the Indian economy has been one of the best performers and

is on high growth path. Infusion of greater degree of competition can play a catalytic

role in unlocking the fuller growth potential in many critical areas of the economy. In

the interest of consumers, and the economy as whole, it is necessary to promote an

environment that facilitates fair competition outcomes in the market, restrain anti-

competitive behavior and discourage market players from adopting unfair trade

practices. Therefore, competition has become a driving force in the global economy.

Evolution and Development of Competition Law in India

In India the first competition law was enacted in 1969 i.e. Monopolies and

Restrictive Trade Practices Act, 1969 ['MRTP Act, 1969']. The Monopolies and

Restrictive Trade Practices Bill was introduced in the Parliament in the year 1967 and

the same was referred to the Joint Select Committee. The MRTP Act, 1969 came into

force, with effect from, 1 June, 1970.

The enactment of MRTP Act, 1969 was based on the socio – economic philosophy

enshrined in the Directive Principles of State Policy contained in the Constitution of

India. The MRTP Act, 1969 underwent amendments in the 1974, 1980, 1982, 1984,

1986, 1988 and 1991. The amendments introduced in the year 1982 and 1984 were
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based on the recommendations of the Sachar Committee, which was constituted by the

Govt. of India under the Chairmanship of Justice Rajinder Sachar in the year 1977.

The Sachar Committee pointed out that advertisements and sales promotions

having become well established modes of modern business techniques, representations

through such advertisements to the consumer should not become deceptive. The

Committee also noted that fictitious bargain was another common form of deception

and many devices were used to lure buyers into believing that they were getting

something for nothing or at a nominal value for their money. The Committee

recommended that an obligation is to be cast on the seller to speak the truth when he

advertises and also to avoid half truth, the purpose being preventing false or misleading

advertisements.

The Finance Minister in its budget speech in February, 1999 said –

 "The MRTP Act has become obsolete in certain areas in the light of international

economic developments relating to competition laws. We need to shift our focus from

curbing monopolies to promoting competition. The Government has decided to

appoint a committee to examine this range of issues and propose a modern

competition law suitable for our conditions."

In October 1999, the Government of India constituted a High Level Committee

under the Chairmanship of Mr. SVS Raghavan ['Raghavan Committee'] to advise a

modern competition law for the country in line with international developments and to

suggest legislative framework, which may entail a new law or suitable amendments in

the MRTP Act, 1969. The Raghavan Committee presented its report to the Government

in May 2000.
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On the basis of the recommendations of the Raghavan Committee, a draft

competition law was prepared and presented in November 2000 to the Government and

the Competition Bill was introduced in the Parliament, which referred the Bill to its

Standing Committee. After considering the recommendations of the Standing

Committee, the Parliament passed December 2002 the Competition Act, 2002.

The Monopolies and Restrictive Trade Practices Act, 1969 [MRTP Act] repealed

and was replaced by the Competition Act, 2002, with effect from 1 September, 2009.

  The Competition Act, 2002 was enacted to provide for the establishment of a

Commission to prevent practices having adverse effect on competition, and to promote

and sustain competition in the business environment and to protect the interest of

consumers and also to ensure freedom of trade carried on by other participants in

markets in India and for matters connected therewith or incidental thereto. The

Competition Act, 2002 came into existence in January, 2003 and the Competition

Commission of India ['CCI'] was established on 14 October, 2003. CCI consists of a

Chairperson and 6 Members appointed by the Central Government. CCI functions as

market regulator for preventing and regulating anti – competitive practices in the

country. A Competition Appellate Tribunal was also established, which is a quasi-

judicial body established to hear and dispose of appeals against any direction issued, or

decision made by the CCI.

  The Act was subsequently amended by the Competition (Amendment) Act, 2007

and Competition (Amendment) Act, 2009. The provisions of the Competition Act

relating to anti-competitive agreements and abuse of dominant position were notified

on 20May, 2009.

 
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Introduction of the Act was a key step towards facing competition. The Competition Act,

2002 is not intended to prohibit competition in the market. The legislation prohibits

anti-competitive agreements, abuse of dominant position and regulates mergers,

amalgamations and acquisitions.

Elements of Competition Law

 There are three major elements of a competition law;

i) Anti – competitive agreements;

ii) Abuse of dominance; and

iii) Merger, amalgamations and acquisitions control.

Anti- Competitive Agreements

  Anti-competitive agreements are those agreements that restrict competition.

Section 3 of the Competition Act, 2002 prohibits any agreement with respect to

production, supply, distribution, storage, and acquisition or control of goods or services

which causes or is likely to cause an appreciable adverse effect on competition in India.

The term 'Agreement' is broadly defined in section 2(b) of the Competition Act, 2002

and includes any arrangement or understanding or concerted action, whether or not it is

formal, in writing or intended to be enforceable by legal proceedings. The agreements

does not necessarily have to be a formal one and in writing or justifiable in a court of law

and an informal agreement to fix prices will be hit by the provisions of the Competition

Act, 2002.

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Section 3(2) of the Competition Act, 2002 declares that any anti competitive agreement

within the meaning of section 3(1) of the Competition Act, 2002 shall be void. The whole

agreement is construed as void if it contains anti – competitive clauses having

appreciable adverse effect on the competition. The term 'appreciable adverse effect on

competition' used in section 3, is not defined in the Act. However, the Act specifies a

number of factors which the Competition Commission of India must take into account

while determining whether an agreement has an appreciable adverse effect on

competition or not.

Agreement between rivals or competitors is termed as horizontal agreements. The most

malicious form of an anti-competitive agreement is cartelization. When rivals or

competitors agree to fix prices or share consumer or do both, the agreement termed as

cartel. Besides horizontal agreements, there can be anti-competitive agreements

between producers and suppliers or between producers and distributors. These are

referred to as vertical agreements. Vertical agreements too can undermine competition

in the market.

According to section 3(3) of the Act, the kind of agreements which would be considered

to have an 'appreciable adverse effect on competition' would be those agreements which

 Directly or indirectly determine sale or purchase prices;

 Limits or control production, supply, markets, technical developments,

investments or provision of services;

 Share the market or source of production or provision of services by allocation of

inter-alia geographical area of market, nature of goods or number of customers or any

other similar way;

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 Directly or indirectly result in bid rigging or collusive bidding.

 The agreements falling in section 3(3) of the Act shall be judged by 'shall be presumed

rule' and onus to prove otherwise lies on the defendant.

Section 3(4) provides that any agreement amongst enterprises or persons at different

stages or levels of the production chain in different markets, in respect of production,

supply, distribution, storage, sale or price of, or trade in goods or provision of services,

including i) Tie-in agreement; ii) Exclusive supply agreement; iii) Exclusive distribution

agreement; iv) Refusal to deal; v) Resale price maintenance, shall be presumed an anti-

competitive agreement, if such agreements causes or is likely to cause an appreciable

adverse effect on competition in India. 

The agreements falling in section 3(4) of the Act shall be judged by 'rule of reason' and

the onus lies on the prosecutor to prove its appreciable effect on competition in India. 

The section 3(5) of the Act gives due recognition to the intellectual property rights,

which provides that the prohibition against anti – competitive agreements shall not

restrict the right of any person to restrain any infringement of, or to impose reasonable

conditions as may be necessary for protecting, any rights under the Copyright Act, 1957,

the Patents Act, 1970, the Trade Marks Act, 1999, the Geographical Indications of Goods

(Registration and Protection) Act, 1999, the Designs Act, 2000 and the Semi-conductor

Integrated Circuits Layout-Design Act, 2000. 

Further the Competition Act, 2002 does not restrict any person's right to export from

India goods under an agreement which requires him to exclusively supply, distribute or

control goods or provisions of services for fulfilling export contracts.

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Thus any agreement for the purpose of restraining infringement of such Intellectual

Property Rights or for imposing reasonable conditions for protecting such rights shall

not be subject to the prohibition against anti-competitive agreements.

Abuse of Dominant Position

  Section 4 of the Competition Act, 2002 expressly prohibits any enterprise or

group from abusing its dominant position. The term 'Dominant Position' includes a

position of strength, enjoyed by an enterprise or group, in relevant market, in India,

which enables it to –

a) Operate independently of competition forces prevailing in the relevant market; or

b) Affect its competitors or consumers or the relevant market in its favour.

 The terms 'Dominance' is also referred to as market power which is defined as the

ability of the firm to raise prices or reduce output or does both independently of its

rivals and consumers.

As per Section 2(r) of the Competition Act, 2002 'relevant market' means the market,

which may be determined by the Competition Commission of India with reference to the

relevant 'product market' or 'relevant geographical market' or with reference to both.

The Act requires that relevant product market is to be determined by considering;

physical characteristics or end-use of goods; the price of goods of services; consumer

preferences; exclusion of in-house production; the existence of specialized producers;

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and the classification of industrial products. Further the relevant geographical market is

determined by considering; regulatory barriers; local specification requirements;

national procurement policies; adequate distribution facilities; transport costs;

language; consumer preferences; and need for secure or regular supplies or rapid after –

sales services. 

In short, there shall be an abuse of dominant position if an enterprise indulges into the

below mentioned activities –

 Directly or indirectly imposing discriminatory conditions in the purchase or sale

of goods or service, or setting prices in the purchase or sale (including predatory

pricing) of goods or services;

 Limiting or restricting the production of goods or provision of services or market

therefore; or limiting technical or scientific development relating to goods or services to

the prejudice of customers;

 Indulging in practice or practices resulting in the denial of market access;

 Making conclusion of contracts subject to acceptance by other parties of

supplementary obligations, which has no connection with the subject of such contract;

 Utilization of the dominant position in one relevant market to enter into, or

protect, another relevant market.

Section 19(4) of the Act empowers the Competition Commission of India to determine

whether any enterprise or group enjoys a dominant position or not, in the relevant

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market and also to decide whether or not there has been an abuse of dominant position.

Further mere existence of dominance is not to be frowned upon unless the dominance is

abused.

Merger, Amalgamations and Acquisitions Control

  The Competition Act, 2002 uses the word combinations to cover acquisition of

control, shares, voting rights and assets, and mergers and amalgamations.

 Section 6 of the Competition Act, 2002 prohibits any person or enterprise from

entering into a combination which causes or is likely to cause an appreciable adverse

effect on competition within the relevant market in India and if such a combination is

formed, it shall be [Link] Section 6(2) provides that any person or enterprise, who

or which proposes to enter into any combination, shall give a notice to the Competition

Commission of India, disclosing details of the proposed combination, in the form,

prescribed and submit the form together with the prescribed fee within 30 days of –

 - Approval of the proposal relating to merger or amalgamation, by the Board of

Directors of the enterprise concerned with such merger or amalgamation, as the case

may be;

- Execution of any agreement or other document for acquisition, acquiring of control.

The Competition Act, 2002 also sets a threshold below which a merger, acquisition or

acquiring of control is not regarded as a combination.

Section 30 of the Competition Act, 2002 empowers the Competition Commission of

India to determine whether the disclosure made to it under section 6(2) of the Act is
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correct and whether the combination has, or is likely to have, an appreciable adverse

effect on competition in India. Upon receipt of notice for a proposed combination, the

Commission must review the combination within tight time limits or else the

combination is deemed to have been approved.

According to Section 31 of the Act, the Competition Commission of India may allow the

combination if it will not have any appreciable adverse effect on competition in India or

pass an order that the combination shall not take effect, if in its opinion, such

combination has or is likely to have an appreciable adverse effect on competition.

The provisions of Section 6 do not apply to share subscription or financing facility or

any acquisition, by a public financial institution, foreign institutional investor, bank or

venture capital fund, pursuant to any covenant of a loan agreement or investment

agreement.

Remedies under the Competition Act, 2002

 CCI can be approached to report any unfair competition practices. CCI is also

empowered to act suo-moto or on the reference.

Jurisdiction

Section 32 of the Competition Act, 2002 empowers the CCI to take action with respect to

conduct that has occurred outside India and with respect to the parties located outside

India provided that the conduct had an appreciable adverse effect on competition in the

relevant market in India. In support of this provision, Section 18 the Act empowers the

CCI to enter into a memorandum or arrangement with any agency of any foreign

country with the prior approval of the Central Govt.

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 Private enterprises as well as government owned enterprises and even government

departments are covered by the provisions of Competition Act, 2002.

 An enquiry or compliant could be initiated or filed before the Bench of CCI if within the

local limits of its jurisdiction the respondents actually or voluntarily resides, carries on

business or works for personal gain, or where the cause of action wholly or in part

arises.

Competition Advocacy

 The fourth element of a competition law is competition advocacy. Competition

Advocacy is most crucial component of Competition Law. Central Government/State

Government may seek the opinion of CCI on the possible effects of the policy on

competition or any other matter. In this context, Section 49 of the Act envisages that

while formulating a policy on the competition, the Government may make a reference to

the CCI for its opinion on possible effect of such a policy on the competition, or any

other matter. On receipt of such a reference, the CCI shall, give its opinion on it to the

Central Government/State Government, within sixty days of making of such a reference

and the Government may formulate policy as it deems fit. The role of CCI is advisory

and the opinion given by the CCI shall not be binding upon the Central

Government/State Government in formulating such a policy. Further the Act provides

that the CCI shall take suitable measures for the promotion of competition advocacy,

creating awareness and imparting training about competition issues.

Confidentiality

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The Competition Act, 2002 recognizes that information received by the CCI could be

commercially sensitive and its disclosure could result in harm to the business.

 Section 57 of the Act provides that no information relating to any enterprise shall be

disclosed without the prior written permission of the enterprise, except in compliance

with or for the purposed of this Act or for any other law for the time being in force. Thus

it provides to enterprises the protection of confidentiality.

Penalties

  The CCI has powers in relation to anti – competitive agreements and abuse of

dominant positions. If the CCI finds that there is an unfair competition practice, which

caused or is likely to cause an appreciable adverse effect on the competition in India, it

may pass all or any of the following order

- A cease and desist order, which directs the parties involved in such agreement or abuse

of a dominant position to discontinue acting upon such agreement and not to re-enter

such agreement, or to discontinue such abuse of a dominant position, as the case may

be;

- An order which imposes a monetary penalty, as deemed fit but that does not exceed

10% of the average turnover for the last three preceding financial years, on each party to

the agreement or abuse. Provided that in case of a cartel, the CCI may impose on each

producer, seller, distributor, trader or service provider included in that cartel a penalty

of up to three times its profit for each year of the continuance of such agreement or 10%

its turnover for each that it continues such agreement, whichever is higher;

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- An order directs that the agreement must stand modified to the extent and in the

manner that may be specified in the order;

- An order that directs compliance with its orders and directions, including payment of

costs;

- An order that directs the division of an enterprise that is abusing its dominant position

to ensure that it can no longer abuse its dominance; and

- Any order or direction as the CCI deems fit.

Further, any person may apply to the Competition Appellate Tribunal for the

recovery of compensation from any enterprise for any loss or damage shown to have

been suffered by such person as a result of the enterprise –

- Violating directions issued by the CCI;

- Contravening, with no reasonable ground, any decision or order of the CCI issued

under sections 27, 28, 31, 32 and 33 or any condition or restriction subject to which any

approval, sanctions, directions or exemption in relation to any matter has been

accorded, given, made or granted under the Competition Act; or

- Delaying in carrying out such orders or directions

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Conclusion 

The Indian Competition Act, 2002 is very much comprehensive and enacted to

meet the requirements of the economic growth and international economic

developments relating to competition laws. The legislation is in synchronization with

other policies such as trade policy, FDI norms, FEMA etc, which would ensure

uniformity in overall competition policy.

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